Posted on 01/10/2009 11:08:04 AM PST by An Old Man
Gold is unique among commodities as it is perceived as a principal store of wealth. It is an element that does not chemically combine with other elements, does not tarnish, is highly malleable, easy to melt, can be subdivided indefinitely, and can’t be counterfeited.
I believe gold’s economics to be comparatively straightforward:
• gold is the ultimate competitor to the U.S. dollar;
• in the current environment of increasing global competition and military conflict anyone with an interest in building or maintaining wealth who ignores the gold market – and by inference both gold bullion and gold stocks - does so at their peril; and,
• a ‘gold standard’ forces governments to be fiscally responsible and provides a stable economic environment and that the adoption of a ‘non-gold standard environment’ operated with fiat currencies (i.e. currencies not backed by gold) will never do,
• of the 125 million kilograms of gold estimated to have been mined from prehistory to 2001, humans still possessed 106 million kilograms, or roughly 85% of it;
• of that total of 106 million kilograms, roughly 34 million kilograms were held by central banks, and 72 million kilograms were held by private citizens;
• the gold market is not subject to the vicissitudes of either supply or demand in the same manner as other markets. For most commodities production and supply are nearly synonymous, whereas annual gold production from mining is a tiny fraction of the total supply; and,
• gold production is spread throughout the world, making a dramatic rise or drop in production due to political factors unlikely.
(Excerpt) Read more at stockresearchportalblog.com ...
I am sorry you feel that way. Perhaps you would be interested in a paper that discusses the booms and busts you refer to in your response. The following is the section of the paper which mentions the Gold Standards.
5. The Gold Standard
The authors argue that the inter war gold standard was different than the pre war gold standard because it was a full blown gold exchange standard in which, foreign exchange reserves provided central banks greater scope for independent accomodative monetary policies hence encouraging foreign capital to finance credit booms.
Was this really different than the pre 1914 era? Massive investment booms occurred in the U.S. in the 1830’s, and 1870’s which were followed by busts as was the case for Argentina in the 1880s. Why was that earlier experience different from the 1920s? The answer I believe lies not in the differences in the size of the credit boom stressed here but in the severity of the bust. As Bordo and Eichengreen (1999) and Delargy and Goodhart (1999) show, the busts in Argentina in 1890, the U.S. in 1893, Italy 1907 were severe but nothing compared to the Great Depression. As mentioned above, it was the policy response after 1930 and not the credit boom that accounts for the consequences of that event.
For your edification, the entire paper can be found in Comments on “The Great Depression as a Credit Boom Gone Wrong”
By Barry Eichengreen and Kris Michener
The authors argue that the inter war gold standard was different than the pre war gold standard because it was a full blown gold exchange standard in which, foreign exchange reserves provided central banks greater scope for independent accomodative monetary policies hence encouraging foreign capital to finance credit booms.
And here's what the original article said:
a ‘gold standard’ forces governments to be fiscally responsible and provides a stable economic environment...
I seriously question how a government / country on the gold standard can both have a "central back encourage foreign capital to finance credit booms" AND SIMULTANEOUSLY "force governments to be fiscally responsible and provide a stable economic environment."
Personally, I think owning some gold is a great idea. But as a laymen studier of history, politics, and economics, I don't see any evidence over the last 150 years within the US of A that gold-backed currency EVER kept politicians from being stupid, greedy, destructive, and fenced these same politicians off from having their greed and destructive human natures reverberate in a negative way throughout the economy of their day.
And I don't think going back on the gold standard tomorrow would prevent today's politicians from scewing things up, either. YMMV.
Gold never tarishes. If the alloy contains so little gold there is oxidation, it is the other metals that oxidize.
You are mixing apples and oranges and calling them pears.
The Fidelity gold Fund invests in gold stocks and is a good way to play the gold market
The gold standard did not guarantee a "stable economic environment." What it did provide was a stable currency. The dollar in 1930 was worth pretty near what it was worth a hundred years earlier. The dollar today is worth about one percent of what it was worth a hundred years earlier.
Gold did go to 800.
The poster’s article EXACTLY said that the gold standard DID provide a stable economic environment. My contention is that it did no such thing, nor would it do so in the future, even if we somehow could get back on the gold standard tomorrow.
I really don't understand why so many around here treat holding gold as akin to being a flat-earther.
In early '02 Mrs Ghost bought around $200K in gold coins at $300 per oz.
We don't plan to divest it, simply hold it. It has nearly tripled in value (actually more, as most is in collector coins), stock market would have busted our chops.
That, along with some real estate, makes us reasonably confident in staving the wolves.
A warehouse full of Spam would not be nearly as comforting. A guy can't eat much more than one meal of that crap a year, anyway.
I was making a point. But your gold has stayed at the same value you got it for. Only the value of the tender has changed.
Place your bets.....Hyper Inflation or deflation.
The amount of money the Fed is dropping into the economy is beyond comprehension.......GW wants more...asap.....
The dollar will become so diluted in value.....Treas. rates @ zero......Investors wont be stupid forever.....
Over the same time period (even after the current market crash), stocks rose by more than a factor of four--twice as much as the price of gold.
Well, that is debateable.
My home and other real estate went up possibly 40% during the period we have held gold, but has probably dropped back to a 20-30% range.
The stock market obviously wouldn't have been a smart play.
So....what would have been a reasonable place to safeguard and possibly accumulate wealth that would come close to the 300% rise in our gold holdings?
You, and many others, may denigrate gold to your heart's content. I, on the other hand, am quite satisfied with my wife's decision, which is a reflection on her depression era farm parents frugality and distrust of paper money and bankers.
Jey if I had the dough I would be right with ya. But the real value won’t change only the value of the dollars.
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